Policy handbooks are necessary instruments for all businesses, large or small. Family-owned businesses are no exception; they must make sure their policies on everything from cell phone use to sexual harassment are documented and communicated to employees.

Not only do policy handbooks save management time in resolving day-to-day disputes, but they can also be a lifesaver when more severe disputes arise. Your policy handbook can have a profound effect on your situation regarding the IRS, lawsuits and your finances. That's why it's important to have a policy handbook outlining your company policy before a dispute arises. Written polices do the following:

• Assure employees of fair, equal treatment;
• Avoid inconsistent policy interpretations by supervisors;
• Discourage attempts to unionize;
• Reduce civil rights/EEOC complaints.

It may seem impossible, but your policy handbook or lack thereof can have consequences influencing your tax position. There are many tax provisions that are affected by employee use of property. For instance, deductibility of company vehicles requires a written policy prohibiting employees from using them for personal use. If there is no written policy against using the vehicles for personal use, your company may lose a huge deduction. Loss of the deductions can result in a much higher tax liability than what would be fair had a written policy been in place.

The ultimate importance of a policy handbook is the importance it may have in court. Stating your position prior to a dispute or court case can have a profound effect on the outcome of the circumstances. For instance, if you get served a complaint alleging sexual harassment from an employee, would you rather have a policy handbook stating you would not tolerate sexual harassment or not have any written policy on the matter? Stating you will not tolerate sexual harassment after it has been committed may not save you from liability.

Do you work in a hazardous environment? A policy handbook containing safety and OSHA regulations can be a very important device. Not only is it important to keep your employees safe, it's important to define safe procedures to avoid winding up in court.

It's also important to define whether or not your policy handbook constitutes a contract with your employees. If your handbook claims to be a contract, you may be bound by its terms and conditions. It's more likely you will not want this to be a contract. Such a fact must be properly disclaimed in order for the policy manual not to be considered a contract.

Defining job descriptions may also help you legally. The Fair Employment Act describes exempt and nonexempt employees for purposes of paying a salary or wage. Just stating that an employee is exempt or nonexempt does not establish the fact. Care must be taken so that jobs conform to legal standards.

Policy handbooks can also have an impact on your company's finances. Limiting or prohibiting phone calls during work time may prevent an otherwise industrious employee from being a state-to-state socialite while on company time. The result would be greater productivity from the employee and a lower phone bill.

It's also important to define vacation time and what happens to unused time. However, be sure the handbook does not create an enforceable liability by allowing vacation time to accrue.

It's important to define your company policies. Failing to do so allows other people to define them. The consequences of not having a policy handbook can also lead to problems concerning taxes, legal issues and financial matters. It's important to spell these things out in order to prevent someone from doing it for you to your disadvantage.

Tax Planning